To File or Not to File Bankruptcy
Oct 25, 2022If you have been struggling financially for a while, you may be asking yourself if you should file bankruptcy. Figuring out what to do can be stressful and overwhelming when you are not sure what to do. Asking the right questions can help you get the information you need to make an informed decision. Let’s discuss some questions you should ask yourself when you are considering filing bankruptcy.
What amount and type of debt am I struggling with?
You should review your debts to figure out the total amount you owe. You should also figure out the type of debt you are dealing with. Is most of your debt unsecured debt such as medical bills, credit cards, pay day loans and money judgments? Have you fallen behind on secured debt such as a home mortgage or vehicle loan? Do you owe money for taxes to the Internal Revenue Service or Wisconsin Department of Revenue? When trying to find the best debt relief option for your circumstances the amount and type of debt matters.
Can I increase income or decrease expenses?
You should review your income and expenses and set up a budget. This will allow you to find out how much money you have available each month to pay towards your debts. Are there ways you can increase your income, such a getting a better paying job or a part-time job? Do you have a stay-at-home spouse that can get a part-time job? Are there unnecessary expenses that you can cut or any expenses you can reduce, even temporarily? Your household income and expenses will have a big impact on your debt relief options.
Have I reviewed all debt relief options?
Once you have a good understanding of your financial situation you can better explore your debt relief options. We give a detailed list in our blog, “Debt Relief Options in Wisconsin”. In it we discuss a consolidation loan, home equity loan, 401(k) loan, debt management plan, Wisconsin Section 128, Chapter 7 Bankruptcy and Chapter 13 Bankruptcy. Being aware and reviewing all your options for debt relief ensures that you can find the best option for your situation and circumstances.
Will my income qualify to file bankruptcy?
In a Chapter 7 Bankruptcy your household income needs to be below your state’s median income, which is set by the US Census Bureau. The bankruptcy court uses the Chapter 7 Means Test to make this determination, read “Means Test in a Chapter 7 Bankruptcy” to learn more. You may be surprised at the amount of money you can make and still qualify for a Chapter 7 Bankruptcy. If your income is too high to qualify for a Chapter 7 Bankruptcy, you can still get relief by filing a Chapter 13 Bankruptcy. There is no income limit for filing a Chapter13 Bankruptcy.
Will I lose any of my assets if I file bankruptcy?
When filing bankruptcy, you are required to list all the assets you own and protect them by using the exemptions allowed. There are various exemptions to protect your home, vehicles, bank accounts and retirement accounts, just to list a few. Most people can protect everything they own. If you own significant assets that you don’t want to lose, a Chapter 13 Bankruptcy can help you keep unexempted property while managing your debt.
Will I be able to rebuild my credit after bankruptcy?
Even though bankruptcy will remain on your credit for up to 10 years, the impact of the filing will lessen over time. If your credit is already ruined due to a lengthy history of unpaid medical bills, credit cards, pay day loans and money judgments then, bankruptcy may help improve your credit score. Regardless, you can rebuild your credit after bankruptcy if you take the appropriate steps. Will you be able to create a budget, avoid unnecessary debt, make on time payments? What you do after bankruptcy will matter.
Have I met with an experienced bankruptcy attorney?
All this information is helpful but the best way to figure things out is to sit down with someone who does this every day. An experienced bankruptcy attorney will be able to sit down with you, review your assets, debts, income and help figure out the best debt relief option for your specific circumstances.
Dealing with debt can be overwhelming and sometimes you don’t know what to do, so you do nothing, and the problem just gets worse. At Pedersen Law Office, LLCwe understand how stressful being in debt can be; that is why we offer free consults. We will discuss your circumstances and goals and help figure out what option is best for you and help you through the entire process.